Is Tanaka Part of Yankees $189 Million Bluff?

The Yankees have gone all-in on Masahiro Tanaka, but, so too have several other teams. As a result, the Bronx Bombers’ off season plan hangs in the balance ahead of the looming Thursday deadline. Regardless of Tanaka’s decision, however, it’s hard not to wonder whether the Yankees’ aggressive play isn’t part of a bigger bluff.

Even if the Yankees sign Tanaka, they’ll have to answer about their payroll.

If the Yankees are lucky enough to sign Tanaka, it will be the crowning achievement of their off season. The move will give the team’s brass an opportunity to crow about their commitment to winning and willingness to spend well in excess of the $189 million luxury tax threshold. All talk of the suddenly frugal Yankees will be put to rest, and the fans, now buoyed by the team’s renewed financial commitment, will start pouring through the turnstiles and turning on the YES Network. It’s such a perfect plan, there has to be a catch.

If Tanaka signs in the Bronx for the $20 million salary he is reportedly seeking, the Yankees’ payroll would balloon to about $205 million. Judging by intent, this seems to validate Hal Steinbrenner’s insistence that financial restrictions would not prevent the Yankees from fielding a championship caliber team. However, that’s only true if you regard the $189 million luxury tax threshold as the new barometer of team spending.

Since the start of their recent dynasty, the Yankees have usually been baseball’s biggest spender. But, that’s only half the story. Over that span, the Yankees have also been the sport’s biggest revenue generator. So, even though the team’s payroll has remained high on a nominal basis, it has actually declined in relative terms, including based on inflation as well as a percentage of league payroll and team revenue.

In 2005, the Yankees’ payroll peaked at 75% of revenues (87.5% including the luxury tax), but since then, the share of cash flow allotted to salaries has decreased precipitously and was under 50% in 2012. So, with this added perspective, what would a $205 million payroll in 2014 say about the Yankees’ financial commitment? Well, using stagnant revenue from 2012 as a guide (although the Yankees suffered a significant decline in 2013 gate receipts, league-wide revenue and TV-related payments have increased), the Yankees’ payroll would be less than 44% of the team’s intake (45.2% including the luxury tax), the lowest figure since at least 2001. In order to approach the 62% average ratio of payroll plus luxury tax to revenue since 2001, the Yankees would have to spend $257 million on players in 2014 (again using stagnant 2012 revenue and $291 million in total payroll related expenditures).

By focusing so much on plan $189 million, the franchise has effectively defined payroll expectations down. Instead of being judged against their past efforts (which have been rewarded with perennial success on the field), the Yankees have lowered the bar. That’s why the team should not be heralded for going $16 million over the luxury tax limit when/if they sign Tanaka. On the contrary, fans and media should be asking why the Yankees are under spending their historical means by about $50 million.

If Tanaka really was the missing piece, there would be no need for the Yankees to open their wallet as wide as the past. However, considering the track record of recent Japanese starters, it would be unreasonable to expect Tanaka to dominate from day one. Although the righty may eventually emerge as an ace, the Yankees (or whatever team signs him) should be prepared for a transitional phase. And, even if the Japanese right hander immediately lives up to the hype, he still can’t fill the Yankees’ many other holes in the rotation, bullpen, and infield. That’s why the potential signing of Tanaka would not be a validation. The Yankees still have a lot of work to do, and questions remain about their willingness to spend enough to finish the job.

The Yankees have the financial wherewithal to continue improving their 2014 roster. If Hal Steinbrenner wants to live up to his declaration, Tanaka shouldn’t be the finishing touch. Otherwise, Yankee fans will eventually see through the bluff. Of course, that assumes the organization is even willing to pay whatever it takes to sign the Japanese right hander. If this too proves to be a bluff, then all bets are off in the Bronx.

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6 Responses

Insightful thought, Will. Of course, now I want to see every teams payroll this way for comparison, and ask if the Yankees spending is really that much different compared to smaller market teams, or if its just the absolute numbers that differ.

Agreed. This does not surprise me at all because Hal has been so focused on his “goal” of $189 million for years and when you add up all the moves made this off-season, minus McCann, it does not make much sense to fix one area only to let another slide.

I could not agree with you sentiments more. I have had a bad feeling the Yankees are bluffing….b/c technically the Yankees front office cannot be totally blamed for losing Tanaka. And the Yankees are well aware that how fierce the competition is for him, so it is a bluff with the best odds.

It makes no sense to me for the Yankees to be “all in” on signing Tanaka, but have no problem not solidifying the bullpen considering this is their first year really without Mo.

Also, if 2013 taught the Yankees anything it should be that banking on veterans with injury history’s to stay off the DL all season doesn’t work without viable back-ups in place.

The Yankees go and fix their major issue behind the dish by inking McCann, only to use “a player by committee” again as this season starters at both second and third base? It is almost if they are trying swept up Beltran and Ellsbury thinking they might put more behinds in the seats, when winning is what does that.

The tax breaks and city backing help the Yankees pay less in interest because they enjoy a lower rate and make payments in lieu of taxes. They are also allowed to deduct debt service from their revenue sharing obligation. So, yes, in addition to significantly increasing their revenue, the new YS has also had expense-related advantages.